“One of the quirks of the health care system is that health plans individually negotiate different prices with hospitals and doctors. The result is that two health plans can pay different prices for the same procedure at the same hospital. The contracts typically prevent a health plan from saying that it charges a certain amount for a procedure, though a health plan can show the discounted charges on patients’ bills.
Many economists contend that the practice contributes to the inefficiency of the health care system and lessens hospitals’ incentive to become more efficient. It also makes it impossible for consumers to shop for hospitals with the best prices.”
– Milwaukee Journal Sentinal, “Health plan lifts the veil on charges“) Feb 23, 2006
One major impediemnt to adequate functioning of medical markets is that consumers often do not know what prices each hospital charges them (or their insurance). HealthCare Direct LLC is trying to change this using the philsophy that “Sunlight is the best disinfectant.” The aim is to steer self-insured employers towards more cost efficient solutions, by compelling providers to release their pricing schedules.
Kellogg Business School at Northwestern University cites a Journal Sentinal article which states that:
“HealthCare Direct LLC has persuaded ProHealth Care and Columbia St. Mary’s, two health care systems in the Milwaukee area, to accept a flat rate for 26 common hospital procedures and to disclose the price of each.
The goal is to help make health care a bit more like other markets, in which buyers have an easier time determining which companies have the lowest prices and, theoretically, are the most efficient.”